Key changes to Cayman Islands company legislation

In a welcome set of changes, the Companies (Amendment) Act, 2024 (the “Amendment Act”), which was passed by the Cayman Islands Parliament in early 2024, will come into force on 1 January 2026 following a commencement order gazetted on 11 November 2025. Once in force, the Amendment Act will amend the Companies Act (As Revised) of the Cayman Islands (the “Companies Act”). The amendments are largely intended to ensure that the Cayman Islands continue to be a leading jurisdiction of choice in the offshore legal services market.

Reduction of share capital without the need for Court approval

Under the current regime, a solvent company that wants to reduce its share capital (other than through redemption or repurchase) must obtain the approval of the Grand Court of the Cayman Islands (the “Court”). This process is costly and impractical, particularly because creditor protection is arguably unnecessary for a solvent entity.

The Amendment Act introduces an alternative procedure that does not require the confirmation of the Court. Specifically, it permits a capital reduction without the confirmation of the Court, where authorised by the relevant company’s articles of association, by passing a special resolution that is supported by a solvency statement.

The solvency statement must be made by the director(s) of the relevant company in the prescribed form no more than thirty (30) days before the date on which the special resolution for reducing the company’s share capital is passed. It must include a confirmation from the director(s) of the relevant company to the effect that a full enquiry into the company’s affairs has been made and that to the best of the directors’ knowledge and belief the company will be able to pay its debts as they fall due in the ordinary course of business commencing on the date of the statement. Any director who knowingly makes a solvency statement without having reasonable grounds to believe that the company will be able to pay its debts in full as they fall due in the ordinary course of business commits an offence.

To register the reduction, both the solvency statement and the minute of the reduction must be filed with the Registrar of Companies (the “Registrar”) within fifteen (15) days after the special resolution is passed. Upon receipt of a copy of the solvent statement and the minute, the Registrar must register the solvency statement and the minute and issue a certificate to the company stating that the solvency statement and the minute have been registered. The Registrar must also publish a notice of the registration of the solvency statement and the minute in the Cayman Islands Gazette.

The certificate issued by the Registrar is conclusive evidence that all the requirements of the Companies Act with respect to the reduction of the relevant company’s share capital have been complied with and that the share capital of the company is as stated in the minute. The minute, when registered, is deemed to be substituted for the corresponding part of the memorandum of association of the relevant company and is valid and alterable as if it had been contained in the memorandum of association on the effective date of the reduction of capital.

Redemption of fractional shares

The Amendment Act confirms that fractional shares may be redeemed where permitted by the relevant company’s articles of association. This has been a longstanding practice in the Cayman Islands, which the Companies Act will now expressly acknowledge.

Continuation into the Cayman Islands

The Companies Act will be expanded to provide that a body corporate with limited liability, and without a share capital under the laws of any jurisdiction outside the Cayman Islands, may apply to the Registrar to be registered by way of continuation as an exempted company limited by shares into the Cayman Islands. Currently, only a foreign body corporate with limited liability and a share capital may apply to continue into the Cayman Islands.

Conversion into an exempted company

The Companies Act will introduce a mechanism whereby each of a Cayman Islands limited liability company (“LLC”) and a Cayman Islands foundation company (“Foundation”) may convert into an exempted company. This additional flexibility is potentially helpful if the relevant company’s circumstances change and another legal form becomes more appropriate.

An LLC may be re-registered as an exempted company upon the affirmative vote or written consent of at least two-thirds (2/3) of its members, or if the LLC is expressly permitted in its LLC agreement to provide an alternative vote, with the written consent or any other form of authorisation for the conversion as may be provided for in the agreement. The relevant vote, consent or other authorisation must adopt a registration declaration for the LLC as an exempted company and a memorandum and articles of association in conformity with the requirements of the Companies Act to take effect upon re-registration of the LLC.

Similarly, a Foundation may be re-registered as an exempted company if it passes a special resolution to that effect. The resolution must adopt a registration declaration for the Foundation as an exempted company and a memorandum and articles of association in conformity with the requirements of the Companies Act to take effect upon re-registration of the Foundation.

In each case, the LLC or the Foundation (as applicable) must submit the registration declaration and a certificate of good standing to the Registrar. If the Registrar is satisfied that the LLC or the Foundation (as applicable) may be re-registered as an exempted company, then it must issue a certificate of re-registration stating that the applicant has been re-registered as an exempted company. A certificate of re-registration is conclusive evidence that the requirements of the Companies Act in respect of registration have been complied with and that the applicant has been re-registered as an exempted company.

Importantly, conversion does not:

• create a new legal entity;
• prejudice or affect the identity or continuity of the applicant;
• affect the property of the applicant;
• affect any appointment made, resolution passed or any other act or thing done in relation to the applicant pursuant to a power conferred by the memorandum and articles of association or the LLC agreement (as applicable) of the applicant or the laws of the Cayman Islands;
• subject to the memorandum and articles of association adopted in the conversion which shall replace the memorandum and articles of association or the LLC agreement (as applicable) of the applicant, affect the rights, powers, authorities, functions and liabilities or obligations of the applicant or any other person; or
• render defective any legal proceedings by or against the applicant.

Re-registration of a Cayman Islands exempted company as an ordinary resident company

The Companies Act will permit an exempted company to re-register as an ordinary resident company.

An exempted company is the most common form of offshore vehicle in the Cayman Islands. The objects of an exempted company must be carried out mainly outside the Cayman Islands or pursuant to a licence to carry on business in the Cayman Islands. In contrast, an ordinary resident company mainly carries on trade or business in the Cayman Islands subject to relevant licencing requirements.

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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication. This article was last updated on 1 December 2025.